Even though supply chain issues and parts shortages continue to plague the automotive industry, sales seem to be doing quite well. TrueCar has released its May 2021 forecast, which projected the sales of 1,509,221 units. This number is 36% higher than May of 2020 when the global pandemic and shutdowns were in their early stages and 9% higher than May 2019. May 2021’s estimated seasonally adjusted annualized rate (SAAR) rose to 16.2 million, which is a notable jump from 12.1 SAAR a year ago.

TrueCar projected that excluding fleet sales, 1,379,623 U.S. deliveries would be made, which is a 2% increase from April 2021. Used vehicle sales are staying strong, with an estimation that over 4 million will be sold for May 2021. This is an increase of 13% from a year ago and 4% from April 2021. Fleet sales projections dropped 18% from April 2021 but increased by 47% compared to May 2020.

Average interest rates for both new vehicles (4.6%) and used vehicles (7.6%) are still relatively low, but prices continue to rise, up 3% from May 2020 and 1% from last month. Average loan terms are 70 and 69 months for new and used vehicles, respectively. Cars are also selling at increased speeds, with TrueCar Analyst Nick Woolard reporting that “vehicles are turning quickly, almost 4 weeks faster than what we saw during this period in 2019.”

Incentives lower on decreased inventory

TrueCar’s Vice President of OEM Solutions, Valeri Tompkins, stated that average incentive spend in May is expected to be under $3,000, which is a sharp 30% decrease from 2020. She added that, “With continued constraint on vehicle production, we expect incentives to remain low, at least throughout the summer.”

While increased sales help boost the economy and dealerships’ profits, these supply shortages and rising prices have impacted dealerships nationwide. Low inventory means dealerships are competing for vehicles to fill their lots, and many dealerships don’t have vehicles with the exact specifications that certain consumers are looking for. Cox Automotive Economist Charlie Chesbrough stated that supply is “more than 40% below last year’s level,” making inventory sparse compared to a year ago.

Various automakers have further announced periodic shutdowns due to the semiconductor chip shortage, which means available vehicles in dealership lots are dwindling even more. Wards Intelligence reported that by the end of April, dealers had under 2 million vehicles en route to their stores, which is about 50% of the normal amount.

Some dealership owners are frustrated with automakers’ current push to advertise their vehicles despite not being able to produce sufficient supply, and others have even been encouraging consumers to trade in their vehicles for new ones in an effort to replenish the shortage of used vehicles.

Ultimately, low supply and high demand is impacting dealerships in ways many would have never foreseen, and analysts don’t expect the ongoing problems to dissipate soon. Most experts believe the current supply chain issues will remain throughout the year, continuing the shortages and increasing prices. Dealerships will have to find ways to mitigate the issues by offering discounts and incentives when possible as well as asking customers for patience and flexibility when the cars they want haven’t made it to the lot yet.

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